SK Hynix may win memory deal

Toshiba signed MOU, but two more consortia are still in the running

Sept 14,2017

Japanese electronics giant Toshiba signed a memorandum of understanding with a consortium involving U.S. Bain Capital as well as Korean chipmaker SK Hynix, signaling that the two parties are back at the negotiating table.

Toshiba announced Wednesday that its board of directors has decided to continue negotiations with the Bain-led consortium and that it will work to expedite the conclusion of a stock purchase agreement by the end of this month.

While Toshiba seemed likely to hand over its memory unit to a consortium led by its joint chip producing partner Western Digital, the announcement is yet another twist in the already dramatic negotiation.

Toshiba’s shift was largely due to a “new proposal” that Bain has come up with, according to the Japanese conglomerate. The exact terms of the new proposal have not been revealed yet but the Wall Street Journal reported Wednesday that the Bain-led consortium also includes Seagate Technology and Dell, as well as Apple, and that the group sent a letter of intent to buy Toshiba at more than $18 billion.

While the participation of Apple had already been leaked, the inclusion of Seagate and Dell is new. The Wall Street Journal, however, did say that the group’s membership could still change.

Western Digital, which was close to snatching the deal, expressed disappointment after Toshiba’s announcement and stressed that its arbitration requests filed against the sale still hold.

“We are disappointed that Toshiba would take this action despite Western Digital’s tireless efforts to reach a resolution that is in the best interest of all stakeholders,” the U.S. hard drive manufacturer said in a statement. “It is surprising that Toshiba would continue to pursue a transaction with a consortium led by Korea-based SK Hynix and Bain Capital Japan without SanDisk’s consent.”

The U.S. company had filed a request for arbitration to block the sale of Toshiba’s memory unit to a third party without its consent, citing a breach of joint-venture agreements. But the company told Toshiba earlier this month that it could ditch the arbitration request if a deal is reached.

However, the announcement on Wednesday doesn’t mean the Bain-led consortium should feel too relieved.

The capricious Toshiba did not forget to note that “the signing of this MOU [with the Bain-led consortium] does not eliminate the possibility of negotiations with other consortia.”

Along with the Western Digital led consortium, another consortium led by Taiwanese Hon Hai Precision Industry, known as Foxconn, is still in the running.

While Toshiba agonize over the issue of selecting a viable purchaser of its memory unit, it still remains uncertain when the Japanese conglomerate will announce its final choice. Japanese media are pointing to Sept. 20 as the likely announcement date.

“Toshiba intends to reach a definitive agreement that fully meets our objectives at the earliest possible date,” said Yasuo Naruke, head of Toshiba’s chips business.

Toshiba is in a rush to sell the flash memory unit to cover losses from its bankrupt U.S. nuclear unit Westinghouse and wants to complete the sale by March, the end of the fiscal year. It is in dire need of cash to avoid being delisted from the Tokyo Stock Exchange.